Commenting on UK inflation falling to lowest levels since 2016, Chris Towner, Director at JCRA, said: “The sun continues to shine on the British consumer as inflation data released today showed core inflation dropping to 1.5% y/y, the smallest increase since November 2016.
“With the rate of inflation falling and average earnings soaring to 4%, this gives the British worker real wage inflation of 2.5% which comes as a useful buffer in these uncertain times. Prices were kept at bay by lower computer game and clothing prices and given the competitive Pound you can expect retail sales to hold up when they are released tomorrow.
“The members of the Bank of England MPC can pause for breath for now; however, looking forward this may seem more as a temporary downward blip in inflation rather than something more structural. Wages at 11-year highs and inflation at multi-year lows normally points to inflationary pressures and this will remain a medium to longer term concern for the Bank of England.
“Sterling continues to hold onto its recent gains and now the market will wait for more Brexit signals to help decide the next move.”